The office is aflutter with Fantasy Football season. In between our typical discussions of the European crisis expansion into Spain or the proposed expansion of fiduciary governance procedures, some of our team members get into detailed conversations over first draft selections, offensive linemen, which wide-receiver to pick, and how to set up a team designed for success.
Personally, I more often consider team sports as a metaphor for investing principles. That is not a unique leap-of-logic on my part; some statistics such as an investment manager’s “batting-average” openly reference sports. In a June's newsletter, "Stormclouds", I made comparisons to Los Angeles Angel Albert Pujols’ hitting streak, but the seasons keep changing and now football is the primary focus.
While listening to my coworkers’ conversations about selecting ideal football players for their fantasy football team, I keep finding analogies between this process and investment manager selection & overall portfolio design. For individual players – a football player or an investment manager – you always have to question if you’re picking someone who is consistently skillful, simply lucky, or somehow exploiting a temporary advantage that rewards their style. When designing the team --- either a team of football players or a lineup of investment managers --- you’ve got to be sensitive to the overall strategy and ideally look for synergies to produce optimal outcomes.
Finally, there is always a cost --- an opportunity cost in time, positioning, or dollars --- that needs to be incorporated into the decision.
I thought last year’s movie Moneyball was an insightful and engaging look into purely quantitative cost & benefit analysis for a sports team. Did everyone else out there see it?
Sadly, I don’t have any information or any hot-tips on Fantasy Football to send your way. On the other hand, for information on investment manager selection or portfolio construction, you can check out these articles on due diligence and trends in portfolio construction.
As always, please feel free to peruse the other article selections on our website.